GAO: Contract program for vet-owned vendors vulnerable to fraud

Mar. 20, 2013 - 12:10PM
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The Veterans Affairs Department awarded nearly $4 billion in veteran set-aside contracts in 2012, but a congressional watchdog said Tuesday that officials aren’t doing enough to beef up how the department verifies contractor eligibility.

Despite hiring more than two dozen employees and 174 contractors to bolster contractor verification efforts, the VA’s program for awarding contracts to veteran-owned and service-disabled veteran-owned businesses remains vulnerable to fraud and abuse, William Shear, director of financial markets and community investment at the Government Accountability Office, told a House panel Tuesday.

Shear’s remarks came during a joint hearing of two subcommittees — one under the House Veterans Affairs Committee, the other under the Small Business Committee — that also saw veterans’ groups complain that VA rules were too confusing and sometimes at odds with Small Business Administration policies.

Davy Leghorn, assistant director in the American Legion’s economic division, testified that many veterans view the VA contract verification process as overly burdensome and overzealous.

“The bottom line here is that a legitimate firm may qualify under one program but not the other,” said Rep. Richard Hanna, R-N.Y., chairman of the subcommittee on contracting and workforce.

Service-disabled veteran-owned companies stand to lose out on more than 7,500 contracts worth more than $1 billion due to sequestration, said Rep. Grace Meng, D-N.Y.

“Given the recent sequester it is more important than ever to correct these flaws,” she said.

But Thomas Leney, executive director of the VA’s Office of Small and Disadvantaged Business Utilization, said the VA has made a host of improvements aimed at vetting businesses and ensuring only eligible firms get veteran contracts.

He also said there were only a few differences between the VA and SBA in the regulation and interpretation of rules governing verification programs at the agencies.

Still, Shear said congressional auditors were unable to test how well the VA’s new verification process works because of what he called a “lack of progress”. And while he credited the VA for improvements in fraud prevention, he added that “we know there are a lot of concerns out there.”